What is cross-border e-commerce? Comprehensive Explanation of the "Barriers" to Launching and the payment That Affect Sales ・Preventing Cart-Abandoned Items

Against the backdrop of shrinking domestic markets due to the declining birthrate and aging population, the number of companies entering the "cross-border e-commerce (overseas e-commerce)" market in search of new growth opportunities is rapidly increasing. Cross-border e-commerce that allows direct access to overseas end users is an attractive option, but once launched, it faces many barriers: language, logistics and customs, legal issues, and payment.

Optimizing "payment" is especially important to reliably convert site traffic into sales. If you can't prepare locally familiar payment method, it can lead to serious "cart abandonment." This article thoroughly explains the basics for successful cross-border e-commerce from the perspective of payment experts, key overseas payment method, currency risk and fraud strategies, and how to choose a reliable payment partner.

What is cross-border e-commerce? Market Size and Notable Background

Cross-border e-commerce refers to international online shopping (e-commerce) conducted across borders. It refers to a format where domestic businesses sell their products or services directly to customers living overseas.

In recent years, the cross-border e-commerce market has continued to grow steadily worldwide due to the spread of smartphones, improvements in translation technology, and the development of international logistics infrastructure. In particular, Japan's high-quality cosmetics, supplements, anime and hobby goods, and traditional crafts are extremely popular overseas and are positioned as effective Management Strategy for reaching the vast international market.

Three major benefits of starting cross-border e-commerce

1. Sales Expansion through Entry into a Massive Global Market

While the domestic market in Japan is maturing, overseas markets such as Asia, North America, and Europe, where population growth and economic growth continue, have a vast customer base. By utilizing cross-border e-commerce, you can target customers worldwide and achieve significant sales growth without having a physical store on site.

2. Overseas Expansion with Low Risk and Low Cost

Unlike traditional trade businesses, there is no need to establish overseas local subsidiaries, develop agents, or open physical stores. Since you can start with the resources to build and operate an e-commerce site, you can keep initial investment down and conduct low-risk overseas expansion testing and full-scale operations.

3. Synergy effect with inbound (foreign visitors) demand

When foreign tourists visiting Japan want to buy the same product they bought in Japan again after returning home, cross-border e-commerce sites serve as their destination. By encouraging repeat purchases inspired by the excitement experienced during travel, inbound demand can be turned into long-term continuous sales rather than just temporary consumption.

The 'Four Barriers' Faced When Launching Cross-Border E-commerce

While cross-border e-commerce offers significant advantages, it also presents unique challenges that differ from domestic e-commerce. When entering the market, it is necessary to anticipate the following "four walls" in advance and take measures accordingly.

• Language barriers: The site needs to support multiple languages, and a system that can provide customer support before and after purchase in your native language (or English).
• Logistics and tariff barriers: In addition to securing international shipping routes to various countries, optimizing delivery speed and shipping fees, it is necessary to check for different tariffs and prohibited items for each product.
• Legal and regulatory barriers: You must comply with local consumer protection laws, personal data protection regulations (such as the European GDPR), and the presence or absence of various licenses.
• payment Barrier: Whether the payment method used by overseas end users is implemented on your e-commerce site is the biggest factor determining purchase rates.

The 'payment method' that determines the success or failure of cross-border e-commerce and measures against cart abandonment

The phenomenon where customers visiting an e-commerce site leave the purchase process during the purchase process despite adding products to their cart is called "cart abandonment." One of the biggest causes of cart abandonment in overseas expansion is that "the payment method you want to use are not available."

For domestic e-commerce, Credit card payment, CVS Payment, and Japan-specific ID payment are mainstream, but for overseas end users, payment methods are often unfamiliar. To succeed in cross-border e-commerce, it is essential to provide payment experiences (PX) tailored to the characteristics of the target country or region.

Major Overseas payment method Variations

Countermeasures for 'Foreign Exchange Risk' and 'fraud (chargeback)' in Cross-Border E-Commerce

Response to exchange rate fluctuations (introduction of multi-currency payment)

When selling to overseas customers, if you only display and payment in Japanese yen (JPY), it creates the hassle of currency calculations on the customer's side, raising the purchase barrier. Therefore, it is recommended to introduce a "Multi-currency credit card payment" that allows you to display prices in your local currency such as US Dollar (USD) or Euro (EUR) and payment directly. At that time, it is important to carefully check the specifications of the payment Service Provider (PSP) in advance to determine when the risk of exchange rate fluctuations will be determined.

chargeback Risk Management

Overseas transactions tend to carry a higher risk of credit card fraud (such as impersonation purchases) compared to domestic transactions. If a fraud is discovered and the cardholder cancels the payment, the business may suffer from a "chargeback" that cancels sales despite shipping the product.
To prevent this, it is essential to introduce the international identity authentication standard "EMV 3-D Secure (3D Secure 2.0)." Additionally, by combining fraud detection systems, it is crucial to build a security system that comprehensively blocks suspicious behavior not only at payment times but also before and after payment, which is crucial for protecting corporate cash flow.

Criteria for selecting payment processing company companies (PSPs) to optimize infrastructure of payments

Independently contract and develop a payment system compatible with cross-border e-commerce with overseas payment processing business is impractical due to significant costs and legal barriers. Therefore, it is necessary to choose a trustworthy Actual payment processing company company (PSP) as a partner. When selecting, please focus on the following three pillars.

1. Global standard security and stability: Must you have a robust system infrastructure that fully complies with the global PCI DSS standard and can securely process massive overseas transactions without time lag?
2. Comprehensive multilingual and multi-currency support: Is there scalability to bulk deploy major payment method tailored to the target country (credit cards, PayPal, Greater China payment, etc.) with a single system connection?
3. Support system for overseas-specific issues: Can they provide specialized consulting and thorough contact for practical challenges unique to cross-border e-commerce, such as chargeback response, fraud measures, and payment cycles?

Summary

Entering cross-border e-commerce presents a major opportunity to open up an unlimited market beyond Japan. However, whether we can fully leverage its potential depends on whether we can provide a stress-free, safe, and seamless payment experience (PX) for overseas customers. Identifying your business model and target countries, and choosing payment service providers with robust infrastructure and specialized expertise as partners, is a solid foundation for global business success.